Trump and Manufacturing
What the 2016 Elections Mean for Manufacturers Ford Motor Co.

What the 2016 Elections Mean for Manufacturers

These five economic and fiscal issues offer opportunities for true progress that can help ensure U.S. manufacturing competitiveness and, ultimately, prosperity for Americans.

After perhaps the most vitriolic presidential campaign and surprising election results in U.S. history, pundits and policy wonks alike are scratching their heads, wondering what the coming year will bring in terms of policy change. One thing we do know: Washington will operate much differently in 2017 than it did in 2016.

The business community will consider this good news, at least as it relates to helping it jump-start a zombie American economy.

Unified government is a rare thing, at least when it’s Republicans holding all the power. Since the 1930s, the GOP has controlled the executive and legislative branches of government for a grand total of six years (during Dwight Eisenhower’s and George W. Bush’s terms). How party leaders wield this unfamiliar authority in 2017 will help determine whether voters will let them keep it for the foreseeable future. The surest path to popularity is to re-energize the economy and start raising middle-class living standards again. And no sector of the economy is more influential in generating prosperity than manufacturing.

There are opportunities for true progress – and even bipartisan support – on five economic and fiscal issues that can help ensure U.S. manufacturing competitiveness and, ultimately, prosperity for Americans:

Reform the federal tax code. One of President-elect Trump’s campaign promises was to revise the U.S. tax code, chopping the corporate income tax rate from 35% to 15% (to be offset by the elimination of most business tax credits, except for the R&D credit). This would be a game changer, transitioning the United States from having one of the least to one of the most competitive tax rates in the world. Trump also proposed allowing repatriation of overseas corporate profits at a one-time rate of 10%. Paul Ryan, meanwhile, favors shifting the U.S. from a worldwide tax system to a territorial system. Assuming Congress and the White House can agree to this, under such a plan American companies would have an even greater incentive to repatriate – and, it is hoped, invest – much of the $2.4 trillion they hold offshore.

The surest path to popularity is to re-energize the economy and start raising middle-class living standards again. And no sector of the economy is more influential in generating prosperity than manufacturing.
—Stephen Gold

Ensure a steady supply of labor through immigration reform. According to the U.S. Census Bureau, the portion of citizens 65 and older around the world will rise dramatically in the coming decades, putting extreme pressure on labor supplies. By 2050, 30% of Germans, 26% of Russians, 40% of Japanese, and 25% of Chinese will hold that distinction. Yet only 21% of Americans will be 65 or older. Why? Our relatively open immigration system continues to pump fresh blood and entrepreneurial energy into our businesses and workforce. This puts America at a competitive advantage, one we shouldn’t give up.

The new unified government has an opportunity to do two things: discourage illegal immigration and encourage the legal immigration of skilled workers for technology-driven sectors and lesser-skilled workers for other sectors, including agriculture. It can do this through green card reform, temporary worker programs, a practical national employment verification system, and, as the U.S. Chamber has called for, a “tough but fair process by which the 11 million undocumented individuals currently living in the United States can earn a legal status.”

Provide more balance in the regulatory system. One of candidate Trump’s main campaign planks was to roll back the tsunami of regulations that have overwhelmed American business over the last eight years. Manufacturers have seen an average of 1.5 regulations enacted every week – directly and indirectly reducing the sector’s growth prospects. As president, Trump will have the chance to review and eliminate many of the more punitive executive orders implemented by his predecessor. But it’s the regulatory process that really needs overhauling. For decades, businesses have asked for more realistic cost-benefit analysis before expensive rules are implemented. And Republicans have recommended Congress play a more active role when agencies are considering the most costly regulations. We can expect to see the 115th Congress taking this issue up within its first 100 days.

Raise the level of public and private infrastructure investment. Infrastructure investments and effective transportation systems have a direct impact on manufacturers’ success in meeting customers’ needs. Fifty years ago, public and private infrastructure investment was almost 4% of GDP. Today, that figure has fallen to less than 2%. The NAM has calculated an annual infrastructure funding gap of more than $140 billion – two-thirds of which should go to highway and bridge repair and another quarter of which should go to public transportation. This doesn’t include the necessary modernization of the electrical grid. While Congress and the president will have to grapple with how to pay for such investment, the ROI for the economy would be very high.

Take action to reduce the growing burden of entitlements on the budget. Politicians on both sides of the aisle recognize the importance of a safety net for the elderly and the poor. During the campaign, President-elect Trump vowed to preserve Social Security and Medicare. But the growth of federal entitlements is squeezing out all other federal expenditures, including defense, highways, food stamps, and national parks. The Congressional Budget Office has estimated that by 2024, non-entitlement, non-interest outlays will represent only 7.3% of GDP.

Social Security trustees estimate that the combined retirement and disability trust funds will be exhausted in 2034 (Medicare will beat that by six years). By kicking the can down the road, we are requiring younger generations to transfer more and more of their income to their elders. As columnist Robert Samuelson has consistently argued over the past decade, it is time our political leaders acknowledge that “an aging America needs a new social compact.”

House Speaker Paul Ryan recognizes that entitlement growth is unsustainable and has proposed revisions. If Trump follows his lead, the new unified government is in a position to increase generational fairness through such methods as gradually increasing eligibility ages and instituting means-testing for more affluent senior citizens.

The election results produced no small amount of uncertainty. But if the unified Republican government can make a dent in some of the most pressing economic and fiscal issues of our era, it should prove a boon to manufacturing competitiveness and American prosperity.

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